Railroad transport equipment is typically expensive. For example, the per-unit cost of a railroad car may range from between $50,000 to $250,000, depending on the type and design of the car. Specific examples of railroad transport equipment might include railroad cars, intermodal containers such as ocean and other shipping containers that are placed either on flat cars or specially constructed well cars for ground transport, and transport appurtenance, such as racks, inserted into rail cars to support automobiles. This list is not intended to be exhaustive. Though many different owners of railroad transport equipment build and/or purchase their own individual units, those units mostly operate over the same network of railroad track as do units owned by other entities. Accordingly, it would be very inefficient for each railroad transport company, such as a railroad, to transport cargo using only its own equipment. Instead, in order to increase the efficient utilization of resources, the railroad industry in North America shares railroad transport equipment. In other words, a railroad transport company, when transporting cargo on behalf of a customer, may utilize any transport equipment available, irrespective of who owns that equipment. Essentially, this means that the owner of a railroad car or other type of transport equipment will simply release the equipment into commerce, and be compensated for another's use of that equipment as it is used. Such compensation is known in the industry as “car hire.”
Generally speaking, from the perspective of a railroad transport company using another's railroad transport equipment, there are four types of transport equipment owners to be potentially compensated. Foreign railroads are competing railroads that own shared transport equipment. Private equipment owners build and/or purchase shared equipment, but do not own any physical track on the shared network. TTX (or Trailer Train Company) is a company specifically formed to provide transport equipment and management services to North American railroads, and is owned by North America's leading railroad companies, each of which has stock in TTX. Finally, intermodal equipment owners provide equipment other than rail cars that are used when transporting cargo, such as ocean containers and the like. Compensation made to these owners for the use of their respective pieces of transport equipment is negotiated, and varies not only by the type of owner, but also by the value, age, size, etc. of the specific equipment used.
The importance of accurate car hire calculations cannot be overstated. According to industry estimates, over $3 billion is spent annually to compensate owners of transport equipment, and is considered to be the third highest operating cost of individual railroads, behind labor and fuel. In terms of volume, over two million pieces of registered transport equipment are available for shared use, and for which compensation must be calculated.
From a management perspective, accounting for the car hire amounts owed among operators and owners is a daunting task, not only for the sheer number of units involved—which can be as high as tens of thousands of pieces of equipment used by a railroad in a given month—but also because individual units change hands so frequently. To facilitate both the accurate and uniform calculation of car hire, or amounts owed to equipment owners, a company called RailInc maintains a database of movements of transport equipment. This database is called the Telerail Automated Information Network (TRAIN II) and records both a unique identifier for each shared unit of transportation equipment along with interchange information recording where and when specific transport units are transferred between users. From this information, accurate records of who is using what equipment, for what periods of time, and for how many miles, can in theory be maintained. Furthermore, most rates charged for available pieces of transport equipment are maintained in a Car Hire Accounting Rate Master (CHARM) file. Though the information in these databases is accessible by both the users of the equipment and the owners of the equipment, it is the responsibility of the users (the transporters) to calculate the amount of car hire they owe to each respective owner whose equipment was used in a given month.
Conceptually, the calculation of car hire owed to an owner by a transporter should be a simple process. Car hire rates are applied on both a per-hour basis (or in the case of intermodal equipment, a per day basis) and a per-mile basis. In other words, the amount of car hire owed is the sum of a negotiated hourly rate multiplied by the hours used, and a negotiated mileage rate multiplied by the number of miles the transporter moved the applicable transport unit. Once the time and mileage start and end points are deduced from the RailInc database, a net amount owed for use of the unit can be calculated.
In practice, however, several factors complicate this computation. First, each railroad transport company must update interchange information with RailInc in a timely manner. Unfortunately, many such companies are not as meticulous as would be ideal, and interchange gaps in RailInc's database commonly occur. To address this issue, the North American railroad industry has developed an automated process called LCS (Liability Continuity System) that analyzes the data from TRAIN II, identifies missing interchange information, and assigns appropriate liability. Specifically, each railroad transporter is required to report an interchange within 120 hours of its occurrence. Each night, the LCS system analyzes reportings that are older than 120 hours and creates LCS messages for transport equipment. If one party to an equipment interchange does not report, the information provided by the other party is used. If neither party reports, LCS attempts to create continuity by analyzing the next three reported moves.
More problematic to the accurate computation of car hire amounts owed are reclaims. Reclaims are offsets to amounts of car hire owed, and are either specifically defined in uniform car hire rules adopted by the rail industry, or are specifically negotiated among parties. As one example, Car Hire Rule 22 allows for a reclaim if an empty car does not move due to the loading station being full, closed etc. As another example, two parties may negotiate special reclaims that permit 120 free hours a month. As a third example, a negotiated reclaim may reduce either, or both, the per-mile rate or the per-hour rate for specific cars, types of commodities transported, etc. While the computation of a base car hire amount is straightforward, the computation of any offsetting reclaims can be complicated, not only computationally due to the varying types of reclaims, but also administratively because often the only party documenting the reclaim is the transporter, making verification by the owner somewhat difficult. Accordingly, existing car hire calculation systems limit themselves to the application of a single reclaim per piece of equipment at any given time, and also require that the transporter document any desired reclaim at the time an interchange is reported, using a code specific to the reclaim being asserted. For example, when transporter X reports acquiring equipment Y at point A and time B and releasing the equipment at point C and time D, the transporter will enter a single applicable reclaim code for that movement. In this manner, the code can be used to calculate the applicable offset against amounts owed for the use of the equipment, and is documented contemporaneously with the movement of the equipment for verification by the equipment owner.
Using information from the respective TRAIN II, CHARM, and LCS systems, net amounts of car hire owed are calculated by transporters and reported back to RailInc by the 40th day following the month being calculated. Almost all Class I railroads, defined as those having annual operating revenues at or above $50 million (in 1978 dollars), and including BNSF, CN, UP and others, use their own proprietary systems. Similarly, two Class II railroads, defined as railroads with annual operating revenues between $10 million and $50 million (again in 1978 dollars) also use proprietary systems. Most of the remaining railroads pay third parties to calculate the amount of car hire they owe. Such third parties include Railcar Management Inc. (RMI) and Intellitrans, LLC.
Both the proprietary and third party payables systems mentioned above are not as accurate as is desired. Specifically, they tend to undervalue the amount of reclaims applicable to car hire, and therefore lead railroads to pay more car hire than is warranted. This occurs primarily for two reasons. First, each system can only apply a single reclaim to each car possession. Second, an operator may inadvertently omit entering a reclaim mode or may mistype the reclaim mode causing the reclaim to be invalidated. In either instance, an applicable reclaim is never applied, costing the railroad money.
What is desired, therefore, is an improved payables system for calculating the amount of car hire owed by a railroad transporter to an owner of transport equipment.
The foregoing and other objectives, features, and advantages of the invention will be more readily understood upon consideration of the following detailed description of the invention, taken in conjunction with the accompanying drawings.